Warsh Maintains Data-Dependent Approach
Fed Chair Kevin Warsh addressed the IMF-World Bank Annual Meetings alongside IMF Managing Director Kristalina Georgieva, refraining from offering signals about the October 27–28 FOMC meeting. "I don't prejudge meetings. I don't believe in saying now what I might do at the meetings we have in the balance of this year," Warsh stated, reinforcing his preference for data-dependent policy decisions over forward guidance.
Warsh defended the Fed's September rate hike to 3.75–4%, characterizing it as necessary amid sticky inflation and elevated oil prices. He noted that most central banks have tightened monetary policy to combat inflation, describing the effort as a shared challenge globally.
Economic Resilience Amid Structural Tailwinds
The Fed chair highlighted resilience in the US economy despite geopolitical conflicts and energy price pressures. US retail sales data exceeded expectations for two consecutive months, signaling consumer strength. Warsh attributed this to structural growth and investment tailwinds, noting that AI-related investment is contributing to demand growth in the US economy.
Warsh characterized artificial intelligence as "probably the most consequential change to the US and the global economy in my lifetime" but warned that the near-term path will be "very bumpy."
Markets React to Rate Pause Expectations
Bitcoin rebounded more than 2% over 24 hours, trading near $82,300 after dipping to $79,805. The cryptocurrency recovered above its 50-day moving average and reached a daily high of $82,508.
XRP jumped to near $1.35 after falling to $1.28 during the same period, as buy-the-dip sentiment strengthened across markets.
The CME FedWatch Tool showed a sharp decline in odds for a 25 basis point October rate hike, falling from 33% to 15% following Warsh's remarks. However, market participants remain cautious about the possibility of a December rate hike. The 10-year Treasury yield remained stable near 5.08%, while the US dollar index dropped to 101.83 and crude oil prices declined to approximately $97 per barrel.
